N.J. Insurance Reform

Published: October 28, 1997

To the Editor:

The proposed solution to sky-high car insurance rates by James E. McGreevey, the Democratic candidate for New Jersey governor -- ordering them cut by 10 percent -- mirrors the approach of California's Proposition 103, a 1988 measure that I campaigned for and that mandated an immediate 20 percent rate rollback (front page, Oct. 27).

After the rollback passed, insurers went to court to fight it. Some nine years later, after hundreds of millions of dollars in legal and administrative expenses, rebates averaging $90 have been paid out.

But consumers have paid dearly for them. Insurers, uncertain about the rollback and their ability to increase rates after having dropped them, didn't lower rates despite a large drop in accident claim costs. As a result, insurance profits quadrupled in the four years after the measure passed, compared with the four years before, and are now way above the national average. The lesson of California, which Mr. McGreevey cites as a model, is that his magic-wand solution would likely make things worse.

MICHAEL S. JOHNSON

San Francisco, Oct. 27, 1997

The writer is executive director of Voter Revolt, which sponsored Proposition 103.